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CH 17] Business 101 17-7

GRADE: AA

GRADE: A

GRADE: B

How an opened egg spreads on the plate via grade.

place to perform the exchange function and the physical distribution function.
Extending credit to consumers, wholesalers, and retailers is the financing function.
Sales always increases the ability to produce more goods and services. When the
manufacturer receives funds from the wholesaler, then the manufacturer can produce
additional goods. When retailers extend credit to their customers, they may increase
total sales through credit arrangements.
Risk taking is dealing with the uncertainties of future market forces and consumer
behavior. Farmers grow soybeans without the guarantee that there will be a market for
their crop and with the hope that their crop will be able to be harvested without
damage or loss. Wholesalers and retailers acquire inventory for resale on the basis of 17
their research of what retail consumers will buy. This action removes the
manufacturer's risk and gives it to marketing intermediaries. There is no guarantee for
the automotive industry that their new car model will sell in quantity or as rapidly as
they manufacture. Manufacturers accept risk when they schedule production of a
product speculatively before consumers have entered orders.
Standardization and grading deal with standardizing the products in terms of use,
size, and form. Many industries standardize their products with modifications to
differentiate their product from the competition. There are many different tire
manufacturers from which one may select the same size, shape and functionality of tire
for an automobile. Grading standards deals with the quality of the product. Eggs are
sold in grocery stores by standardized size (weight) and grade. These standards,
grades, and weight classes have been developed and are promulgated pursuant to the
authorities contained in the Agricultural Marketing Act of 1946, as amended, (7
U.S.C. 1621 et seq.) and are now maintained by the Agricultural Marketing Service,
U.S. Department of Agriculture. To illustrate: the standard sizes of eggs are X-Large,
Large, Medium, Small and Pee-Wee, though one generally does not purchase the small
and Pee-Wee eggs in the grocery stores. Egg grades that may be sold in retail outlets
include AA, A, and B. The size of an egg is established by its weight and the grade of
the egg is established by its shell characteristics, clarity in candling, and freedom from
defects and diseases.
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